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News Release

Moscow

Vacancy Rates in Existing Warehouse Complexes at Record Low


Moscow, 31 January 2013 – New completions in Q4 reached 124,000 sq m, which is 40% YoY drop for new supply. Demand remains strong, with vacancy rates falling to 0.65%, the lowest they have been for the last 5 years, reported Jones Lang LaSalle experts.

With robust demand continuing, the majority of new supply reaching the market is fully leased or sold prior to the end of construction. Total new supply for 2012 in Moscow Region, measured slightly more than 592,000 sq m. Availability remains largely unaffected.
 
Ilya Vydumkin, Head of Industrial Research, Jones Lang LaSalle, Russia and CIS, commented: “A notable deficit of standing warehouses continued for 2012.  While we expect new completions in 2013 to exceed the 2012 level by 50% (900,000 - 950,000 sq m), we do not expect demand to subside or the supply deficit to be resolved. We are informally calling it a ‘market of future projects’. Key projects expected in 2013 include: PNK-Chekhov (213,000 sq m), IP South Gate (200,000 sq m), LP Nikolskoe (106,000 sq m) and Logopark Sever (110,000 sq m).”
 
Total take up for 2012 measured 1.29m sq m. In Q4 2012 take-up exceeded 355,000 sq m, demonstrating 90% YoY growth. Key demand trends for 2012 were a growing popularity of purchasing deals, with their share of total demand growing from 10% in 2011 to 26% in 2012. This is largely due to lack of available existing areas, the evolution of built-to-suit transactions and the appearance of convenient three-sided financial schemes involving developer, creditor (bank) and occupier.
 
Distribution by deal type
Distribution by deal type.png
 
Source: Jones Lang LaSalle
 
Demand was significantly influenced by growth in e-commerce. Its share in total demand increased from near 0% in 2011 to 13% in 2012.
 
The primary drivers of demand, accounting for 68% of take up, remained retailers and distributors. Notable transactions in 2012 include: 2 leasing deals – Adidas and Enter in PNK-Chekhov (65,000 sq m and 61,000 sq m respectively); 4 sales deals – PRV-Group (33,000 sq m) and NKK (58,300 sq m) in PNK-Vnukovo, Lenta (42,000 sq m) in PNK-Chekhov and Decathlon (33,000 sq m) in South Gate.
 
Supply and demand dynamics in Moscow Region warehouse market
Supply and demand dynamics in Moscow Region warehouse market.png
Source: Jones Lang LaSalle
 
Vacancy rate on the industrial property market now measured 0.65%, a clear indication of the demand/supply imbalance on the market. This is the lowest level recorded on the market since 2007, when the warehouse market in Moscow Region was still in its early development stages, and few modern complexes were present. According to Jones Lang LaSalle forecasts, this supply deficit will remain throughout 2013. Some quarters could demonstrate temporary fluctuations in vacancy rates, as very large completions enter the market, however by year end we still see overall vacancy under 3%.

Dynamics of rents and vacancy rates in Moscow Region warehouses
Dynamics of rents and vacancy rates in Moscow Region warehouses.png
Source: Jones Lang LaSalle

Prime rents in existing premises are stable. Average rental rates of USD135/sq m/year are being recorded. Projects under-construction can offer a discount of USD5-10. Sublease contracts and smaller (2,000-3,000 sq m) areas could achieve rental rates of USD140-145/sq m/year.


About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg, Kiev and Almaty. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg. For further information, please visit www.jll.ru